According to CBRE South Asia, real estate consulting firm, the residential segment is showing green shoots of recovery, as housing sales in India’s top seven cities grew by 73% on a quarterly basis in Q4-2020. CBRE, in its recent report, ‘Residential Real Estate in India – Challenges and Future-Proofing Strategies for Developers’, said the measured policies announced by the Central and State Governments and the RBI, along with incentives provided by the developers, help to address this scenario. Delivered. .
The recovery continued in H1 2021, as sales grew by over 75% year-on-year. Pune led the sales activity with around 26% share, followed by Mumbai (19%). It was followed by Hyderabad and Delhi-NCR with 18% and 17% shares respectively.
While the report captures the recovery of residential real estate, it also highlights the factors that have led to the increase in affordable and mid-home housing sales in India over the past decade.
Affordability at its highest level in a decade
While property prices have grown at a CAGR of 1-6% in the high-end segment and around 2-7% in the mid-segment since 2010, GDP per capita grew at a CAGR of 4.0% between 2010 and 2020.
Furthermore, the growth in GDP per capita for the top seven cities was above the national average, with Bengaluru reporting the highest CAGR (6.6%). Therefore, income growth outpaced the average increase in property prices, further contributing to housing affordability.
In addition, the RBI gradually reduced the repo rate from 6.25% in February 2019 to 4.0% in May 2020, thereby reducing the interest rates on home loans to 6.7-6.9%.
Government initiatives to promote affordable housing
Affordable housing has consistently been on the agenda of the central government since the announcement of the ‘Housing for All’ policy in 2014. The reduction in GST on projects under construction from 8% to 1% in 2019, coupled with the announcement of various incentives in the Budget 2021-22, has helped the affordable housing sector to become a major contributor to the growth.
Commenting on the release of this report, Anshuman Magazine, Chairman, India & South-East Asia, Middle East & Africa, CBRE said, “The residential segment has played a major role in the growth of the real estate sector in India. The initiatives taken by the Central and State Governments have been significant and commendable. With incentives like reduction in circle rate or stamp duty along with all-time low interest rates on home loans, extension of moratorium period on loans. Number of states, residential has not only shown recovery but has also become a great addition to the asset portfolio. “
Gaurav Kumar, Managing Director and Co-Head, Capital Markets, India, CBRE, said, “As work from home and e-schooling become the new lifestyle, the need for people to own a home has started . This has prompted a wave of change in the industry as developers are back on their drawing board to design homes more suited to demand.
While the residential sector is witnessing green shoots of recovery, developers are still facing issues like limited availability of credit, tax and regulation complexities, delays in construction due to labor shortage due to reverse migration (though substantially less). navigating through. Input cost due to increase in construction cost. The report discusses these challenges and how developers can navigate through these hurdles to future-proof their portfolios. Some of the key factors that developers must consider are maintaining financial discipline, investing in technology to accelerate construction timelines and keeping pace with the emerging trends in the RE segment.
future trends
To accommodate the trends of WFH and e-schooling, buyers can opt for larger homes
To accommodate home-offices and classrooms, developers may have to come up with flexible home designs
Since commute times are expected to be shorter due to hybrid and satellite office set-ups, the demand for peripheral locations of cities is expected to be higher as they provide more accommodation at relatively lower prices.
Demand for sustainable and smart home design may increase as consumers become more conscious of energy costs
With a greater focus on the health and safety of the labor force, developers can protect the well-being of their labor pool by ensuring cleanliness and social distancing at construction sites.
road ahead
Going forward, developers will have to plan for any future disruptions to the workforce and project delivery. According to CBRE, below are some exercises that can help developers become strong and resilient after the pandemic:
On-time delivery to build brand loyalty and add-on services to build trust with customers
Accelerating the adoption of modern technology and manufacturing techniques
Adopt strong corporate governance and adopt the ESG model
maintain financial discipline
diversifying the development portfolio; Re-align portfolio with market dynamics and market cycles
Invest in upgrading the labor force skill-set.
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